BONDS: EGBs-GILTS CASH CLOSE: Bunds Outperform As Tariff Threats Linger
Feb-27 18:07
Bunds easily outperformed Gilts Thursday in a broader curve steepening move, as US tariff concerns and weakness in equities remained dominant themes.
- Core instruments traded weakly in the early going, with heavy Italian supply and a rebound in gas prices weighing.
- US President Trump's repetition (and clarification) of tariff implementation on trading partners, with the EU (and not necessarily UK) in the crosshairs helped Bunds outperform versus both Treasuries and Gilts.
- Renewed weakness in European equities also helped the core rally.
- Spain kicked off the February Eurozone flash inflation round with core CPI below expectations.
- The German curve leaned bull steeper (slightly twist steepening with Buxl yields higher) with the UK's bear steepening.
- Spreads on the periphery widened toward the cash close in tandem with a pullback in equities.
- Flash February inflation data from Italy/France/Germany are Friday's scheduled highlights.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 3.3bps at 2.035%, 5-Yr is down 3.1bps at 2.165%, 10-Yr is down 2bps at 2.413%, and 30-Yr is up 0.2bps at 2.698%.
- UK: The 2-Yr yield is up 0.4bps at 4.179%, 5-Yr is up 0.5bps at 4.187%, 10-Yr is up 1bps at 4.512%, and 30-Yr is up 2bps at 5.114%.
- Italian BTP spread up 2bps at 113.2bps / Spanish bond spread up 2bps at 63.3bps
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US TSYS/SUPPLY: Review 7Y Auction: Second Consecutive Stop
Jan-28 18:07
- Tsys futures paring losses (TYH5 currently 108-30.5 last, -6.5) after the $44B 7Y note auction (91282CMC2) stops 0.8bp through with 4.457% high yield vs. WI of 4.465%; bid-to-cover 2.64x vs. 2.76x prior.
- Peripheral stats: Indirect take-up falls back to 67.08% vs. 87.88% in December; Direct take-up rebounds off lat month's record low of 2.84% to 23.06%; Dealers take 9.86% vs. 9.27% prior.
- The next 7Y Treasury auction is tentatively scheduled for February 26
FED: US TSY 7Y NOTE AUCTION: HIGH YLD 4.457%; ALLOTMENT 49.84%
Jan-28 18:02
- US TSY 7Y NOTE AUCTION: HIGH YLD 4.457%; ALLOTMENT 49.84%
- US TSY 7Y NOTE AUCTION: DEALERS TAKE 9.86% OF COMPETITIVES
- US TSY 7Y NOTE AUCTION: DIRECTS TAKE 23.06% OF COMPETITIVES
- US TSY 7Y NOTE AUCTION: INDIRECTS TAKE 67.08% OF COMPETITIVES
- US TSY 7Y AUCTION: BID/CVR 2.64
EURUSD TECHS: Support Lies At The 20-Day EMA
Jan-28 18:00
- RES 4: 1.0696 50.0% retracement of the Sep 25 - Jan 13 bear leg
- RES 3: 1.0630 High Dec 06
- RES 2: 1.0574 38.2% retracement of the Sep 25 - Jan 13 bear leg
- RES 1: 1.0533 High Jan 27
- PRICE: 1.0430 @ 16:18 GMT Jan 28
- SUP 1: 1.0388 20-day EMA
- SUP 2: 1.0260 Low Jan 15
- SUP 3: 1.0178 Low Jan 13 and the bear trigger
- SUP 4: 1.0138 1.764 proj of the Sep 25 - Oct 23 - Nov 5 price swing
EURUSD remains in a short-term bull cycle - a correction - and continues to trade closer to its recent highs. The pair has pierced the 50-day EMA, at 1.0459. A clear break of it would strengthen short-term bullish conditions and signal scope for a continuation higher near-term. Sights are on 1.0574, a Fibonacci retracement point. Initial support to watch is 1.0388, the 20-day EMA. A move through the EMA would signal a possible reversal.
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